Real Estate Market / Inflation / Recession / Depression (rent, motel, jobs)

[Bob from down south]

Originally Posted by multitrak

i've learned over the years that you can't "save" people from themselves, especially when they are financially and EMOTIONALLY invested in the manias, when the mob behavior exerts its strongest hold over people. it's similar to an addiction, when people do insane things to get that next fix...they only respond to reason when the mania has come and gone and they've hit rock bottom...

For the most part, that's true. But it's worth speaking out, even if you only have an effect at the margins. Sometimes a mob can be stopped by a few loud voices of reason. FWIW, some of my inner circle actually are stopping and taking notice.

Another case in point...I recently bailed out of a big-name mainstream tax-free mutual fund when I discovered it held a large amount of housing-agency VRDOs (Variable-Rate Demand Obligations) in its portfolio. VRDOs are a type of auction-rate bond generally considered (by the Wall Street crowd) very safe and like cash. So how many folks realize that there were over 1,000 failed auctions for tender-option and other auction rate bonds just in the last week? That's the first time ever that has happened. So many people are flocking to MM funds right now that it's masking the unhappy fact that some MM funds are holding a large amount of auction-rate securities that they now can't sell--buyers for them have left the market. People cashing their MM funds out now can be paid with the cash inflows from people coming into the fund...but when net cash flow to those MM funds goes negative as people start to leave for greener pastures, things could get very interesting. Auction rate securities are becoming more illiquid by the day, and there's a real risk that funds heavily invested in them may not be able to sell them to cash out sellers when they need to. And the first time a MM fund tells its buyers they can't pay them...well, there's no mechanism in place (like the FDIC for banks) to stop a run on one or more MM funds. That flies in the face of the commonly held belief that MM funds are "same as cash."

And the issuers of these auction-rate bonds--municipalities & other public agencies, hospitals, etc, are seeing the rates on these securities skyrocket when the default rates kick in--many of them are the same agencies that are being lambasted by falling tax revenues due to the housing market.

How many people have ever bothered to look under the covers and see what their money-market funds are doing with their money? And how many are truly aware that a MM account, even from their bank, may not be (in fact, probably isn't) FDIC-insured? How many ignored the caveat at the beginning of the MM fund prospectus that says MM funds can, though rarely, lose value? Now is the time to QUESTION EVERYTHING.

[Bob from down south]

In case anyone had any doubt about how evil the Wall Street derivatives trade has really become...this one should bring up your gag reflex.

You can bet your life this policy will end in tears - Business Analysis & Features, Business - Independent.co.uk

[NewAgeRedneck]

Bob from down southe wrote:

NewAgeRedneck--after reading the thread again, I wanted to make sure my replies aren't interpreted as attacks...in retrospect they are rather strongly worded.

I've never thought of your words as a personal attack. You don't seem like the type of persoan to levy a personal attack. I mostly agree with everything you're saying. And that goes for Jazzlover too. I think that both of you are simply telling it like you see it. Nonetheless, no one has yet posted a specific action they have taken based on reading your posts...that was my point. It's all just discussion that no one seems to be acting upon. Meanwhile, the readers of this thread are absorbing greater and greater amounts of doom and gloom, so now we have even greater amounts of doom and gloom pervading the atmosphere. Additionally, the likelihood of positive change is further comprimised because people are more inclined to do something stupid when thery are in a state of gloom.

Personally, I've already taken some steps to simplify my life but I did all of that before I knew this forum existed. I've made a lifelong habit of living below my means. That has always been common sense to me. My 10 year old car only gets 20 mpg, but I drive about 80 miles a week, so I'm OK with that. I'm still using far less gasoline than the PRIUS driver who drives 300 miles a week, and I'm contributing alot less wear and tear on the highways. My sainthood cannonization is scheduled for next week. You're all invited!

[multitrak]

Originally Posted by NewAgeRedneck

Nonetheless, no one has yet posted a specific action they have taken based on reading your posts...that was my point. It's all just discussion that no one seems to be acting upon. Meanwhile, the readers of this thread are absorbing greater and greater amounts of doom and gloom, so now we have even greater amounts of doom and gloom pervading the atmosphere. Furthermore, the likelihood of positive change is further comprimised because people are more inclined to do something stupid when thery are in a state of gloom.

you know what's interesting is when the stock market has made a significant low and then rallied, doom and gloom is the most extreme on trading lists (including some threads on this forum too) and most folks are in a state of despair. this is a psychological response to the emotional component of stock market trading behavior, that when the market makes a low, people are psychologically predisposed to gloomy behavior, expecting the market to go down lower, but it doesn't, and as such it reinforces the gloomy behavior all the more because then they have to deal with the thought that they might have been wrong (and all that implies on a personal ego level). the reverse is also true at market tops when the prevailing mood is happiness. oh btw, the stock market closed strongly up on this trading holiday, which sort of makes my point about the herd instinct presence on even forums (the gloomy posts here) and lists that don't deal primarily with trading issues. never underestimate the power of mob (or herd) psychology at market bottoms and tops, it sucks in non-investors too! you must learn to think for yourself, questioning everything, trusting no one until you've thoroughly examined what the "experts" have had to say...

Personally, I've already taken some steps to simplify my life but I did all of that before I knew this forum existed.

me too, a long time ago. i pretty much know what to expect because i've seen it all before...doom and gloom redux i don't walk around or back away from the doom and gloom psychology, but i walk straight through it because i know that it's just talk and words can't harm you. for the most part, it's temporary and the "bad" won't be as bad as most doomers think. you will not fear the future when you've prepared for the worst, but live each day for the best.

I've made a lifelong habit of living below my means. That has always been common sense to me.

ditto. but if you want to live at your means and don't have to go into debt to do it, then that's fine too. i'm not against consumption, only the continous long term debt necessary to support it. btw, i've been debt free (personally and in business) for over 20 years...no credit cards, no mortgages, no car loans...i pay cash for everything. i started out with nothing but a ms degree and a lot of debt, so i know what can be done with hard work and tenacity, focused on that goal. my credit rating has suffered as a result because i'm one of "those people," but who cares...

My 10 year old car only gets 20 mpg, but I drive about 80 miles a week, so I'm OK with that.

our 10 yr old beater gets around 35 mpg on the flatlands (and 45 mpg in colorado for some reason). we drive around 150 miles/week. and i'll pass on sainthood...

[Bob from down south]

I think there's more herd behavior to be found in the happy-go-lucky crowd than in the doom-gloomers. That herd mentality is exactly what built this mother of all bubbles in housing and credit in the first place.

The bewildered looks on the faces of the sheep when they get the notices in the mail shutting off the HELOCs on their rapidly devaluing houses could be the subject of one of those "priceless" ads.

[jazzlover]

This column on MSN should give Coloradans some real pause:

The year's scariest investing news - MSN Money

The gist of it is that the Pension Benefit Guaranty Corp. is increasing its investments in more volatile and risky securities because it needs the higher returns from those securities to stay solvent. In other words, the government agency that insures pension funds is essentially going to the casino to gamble in order to cover its potential liabilities. Individuals who behave that way financially are called fools. The article explains the political reasons that the PBGC has taken this course, which once again illustrates that the government and its elected officials are being every bit as irresponsible as debt-ridden Americans are about confronting the fact that we have lived beyond our means and have created a huge debt and liability bubble that is going to have to deflate.

Anyone who has a pension coming should be plenty concerned about this. There is ample evidence that a number of private and public pension funds have been either mismanaged or underfunded--or both--and may face insolvency in the years ahead--particularly if the economy sours. Now, the agency that insures those funds, and would step up to pay those pensioners if a fund failed, may not be very solvent or viable itself. Great.

Why should this bode much additional pain for Colorado compared to other US locales? Well, because Colorado has a good chunk of its current funny-money economy based on retirees and other pensioners heavily reliant on those pension fund payments. Worse yet, a whole lot of economic speculation, real estate development and speculation, even infrastructure improvements have been predicated on the assumption that the "retirement economy" and the income from it are guaranteed and sacred. Couple that with a potential souring of many retirees' non-pension investments (a darned strong possibility), and real problems and anguish may lie ahead in the new silver (haired) economy in much of the Rockies and Southwest.

The toxic waste just keeps seeping out of the US's speculative, increasingly non-productive, and overcomsumptive economic cesspool . . .

[Bideshi]

Originally Posted by jazzlover

The toxic waste just keeps seeping out of the US's speculative, increasingly non-productive, and overcomsumptive economic cesspool . . .

Don't sugar coat it Jazz, tell us how you really feel about it...

[multitrak]

Originally Posted by jazzlover

<snip>The toxic waste just keeps seeping out

i don't think i'd want to own property in or downstream of leadville!

The Associated Press: Colorado Town Fears Avalanche of Water

[suzco]

Originally Posted by multitrak

i don't think i'd want to own property in or downstream of leadville!

The Associated Press: Colorado Town Fears Avalanche of Water

A more recent story on the problem in the Denver Post:

Bills shift Leadville tunnel load to feds - The Denver Post

[jazzlover]

Originally Posted by multitrak

i don't think i'd want to own property in or downstream of leadville!

The Associated Press: Colorado Town Fears Avalanche of Water

Considering several Front Range cities (Colorado Springs, Aurora, etc.) source some of their water out of the Arkansas River, suburbanites might just get some extra "additives" to put in the ol' hot tub or coffee pot if that mine water gets loose. Of course, a lot of folks were unknowingly drinking heavy metals, etc. for years before water quality standards were implemented or tightened. One of the things about the "good ol' days" in Colorado (and not that many years ago--even into the early 1970's) that wasn't very good was the water quality in many Colorado towns. I can remember when several of Colorado's major rivers had water quality issues: Clear Creek, the Arkansas River, the Uncompahgre River (I still won't eat a fish caught out of Ridgway Reservoir--the bottom of that thing has to be full of heavy metals from tailings-laden silt), and the Animas River, just to name a few. All had shorelines absolutely stained with mine tailings residue. If tailings weren't enough, in many mountain towns, you didn't dare drink the tap water in spring or early summer for fear of getting Montezuma's Revenge--often from giardia. I certainly hope the feds can get their p*** in a group and get the water in the Leadville Tunnel drained and treated, but if there is a problem it certainly wouldn't be the first time that a Colorado river got tainted with mine tailings.

By the way, a lot of that tailings contamination were from mines abandoned after the first big boom in Colorado--artificially inflated by the federal government much like the current one in real estate--went bust when the Sherman Silver Purchase Act was repealed in 1893. History may not exactly repeat, but it does reprise the same melody an awful lot.